Interview with Chris Bernhardt for The Journal of ... - ITT Exelis

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The Journal of Electronic Defense | May 2012
interview
CHRIS BERNHARDT President, ITT Exelis,
Electronic Systems
By John Knowles
Division
Defense electronics companies,
like ITT Exelis, are
facing a variety of challenges
in terms of constrained
defense budgets
in traditional markets,
gaining access to emerging overseas
markets, and developing the technologies
needed for competitive EW, radar
and communications solutions to meet
tomorrow’s requirements.
JED recently interviewed Chris
Bernhardt, Exelis Executive Vice President
and President of the Exelis Electronic
Systems division, to get his perspective
on the trends and developments in
the defense electronics market. When
Bernhardt joined ITT Exelis in 2001 as
President of its Avionics Systems Division,
the Clifton, NJ, business unit was doing
about $100 million in sales annually.
Leading the business unit through a
decade of organic growth, acquisition,
new product development and reorganization,
Bernhardt now oversees a transformed
Electronic Systems business that
is a multi-billion dollar enterprise.
JED: How much has the transition to
ITT Exelis reshaped the Electronic
Systems business of the company?
Our business shape itself has not
changed as a result of the spinoff.
Through acquisitions and internal
restructuring during the past few years,
Electronic Systems was already well positioned
and aligned with customer priorities
at the time of the spin. For example,
to address the need for multi-functional
capabilities and networked solutions,
we combined our Communications and
Force Protection Systems businesses
and divided one of our business areas to
create a standalone Airborne Electronic
Attack business. Now, we have five business
areas: integrated electronic warfare
systems, radar, reconnaissance and
acoustic systems, integrated structures,
communications and force protection
systems, and our airborne electronic
attack business.
What the spin has enabled us to do
is increase our agility and strategically
focus our resources on the defense and
aerospace market. We can be even more
responsive to the needs of our customers,
which include all military services,
key large primes, and international
customers in 60 countries. At Exelis
we have a unified and highly focused
approach to winning and investing in
the marketplace, driven by an operating
culture that values one team, with one
mission and one shared future.
JED: Being a relatively small, $100
million business a decade ago, how
does the transformation to a much
larger, global organization influence
your thinking and your approach to
the market?
We tailor our strategy as global market,
customer, political, and competitive
dynamics dictate. Agility, open teambased
collaboration and speed are critical
to addressing these dynamics. As we
have grown, we have taken a disciplined
approach to reshaping and transforming
our portfolio of solutions, customers,
platforms and countries, both organically
and through acquisition. We have
a few fundamental strategies that guide
us in reshaping our portfolio. The first
is to not lose focus on our core business
areas and our core customers. Second,
we expand our portfolio of platforms,
customers and solutions based on our
core competency model. That is where
we leverage resources generated from
nurturing our core, and focus our IR&D
on solutions that will be enablers for
our customers. To give you a few examples,
five years ago we were not in synthetic
aperture radar, and we were not
in AESA-type technology. We had only
started thinking about pods as another
option to our internal EW system.
Today, we have customers in all of these
areas. I believe that when we understand
where the capability gaps are
for our customers, we are able to focus
our IR&D very effectively in providing
You hear the term
“open architecture”
everywhere these days,
yet there are many
layers to it.
affordable best-value solutions. Finally,
Exelis Electronic Systems now has an
extremely large installed base that can
serve as an engine for upgrades and
growth across the product portfolio.
JED: The DOD wants to move toward
modular open system architecture
(MOSA) standards. What does that
mean for you and your customers?
You hear the term “open architecture”
everywhere these days, yet there
are many layers to it. From a customer
standpoint, the concept involves a desire
for rapid technology upgrades at reduced
costs, which mitigates diminishing manufacturing
sources. The DOD sees MOSA
as a way to ensure affordable, functional
upgrades (technology refreshes) over
time. Open architecture provides the
opportunity for the Government not to
be locked into unique supplier solutions,
where cost concerns, if not properly mitigated,
could arise. In addition, it can
help offset potential vertical integration
trends by sole source primes with unique
“non open” solutions. All of these factors

interview | CHRIS BERNHARDT President, ITT Exelis, Electronic Systems Division
should provide more affordable solutions
for our customers.
For Exelis Electronic Systems, we are
working with our customers to incorporate
open architecture concepts where
they make sense. The JCREW I1B1 system
we’re developing is a MOSA design,
as is our IRCM solution and several others
in our classified business.
From the 50,000-foot strategic level,
we will continue to embrace open system
architectures where they add value
for the customers we serve. We’ve been
doing it, and we’re going to continue
doing it. I don’t see that changing. At
the same time, profitability is highly
regulated in our industry, and that
impacts internal research and development
decisions. MOSA-driven requirements
and procurements will impact the
payoff calculation and business model
for industry. At the end of the day,
the core of any MOSA system revolves
around standard interfaces and the
operating system. The US Government
wants to own that. They want to own
the software, and they want to own the
hardware, too. On JTRS, for example, the
business model originally intended for
the Government to own the waveform
software rights, but provided for competition
and innovation on the hardware
side. As time has progressed, most
of the original form factors have been
eliminated due to poor cost and technical
performance. The Government has
the opportunity to exploit commercially
derived technologies and contractor
investments in low cost, high performance
radios, but must overcome the
“build-to-print” approach which is not
well suited to modern communication
systems. The current approach is highly
regulated, and that can hinder industry
innovation and impact the capabilities
we provide our fighting forces.
Better technical and affordable alternative
solutions exist, but they are not
on a level playing field versus a Program
of Record. So how should the DOD acquisition
and requirements process change
in tandem to rapidly support more
affordable, innovative solutions from
the Defense industry? This is where
I think the struggle is going to be for
industry, in general.
Multifunction systems
are very complex from
a systems design and
software perspective
and yield more
sophisticated solutions.
A key challenge to gaining traction
with the open architecture model is
the limited number of new starts projected
during the next decade. With
the proposed decreases in RD&E and
procurement spending, new starts are
going to be rare events. Programs that
are already in process are going to be
around for the next decade assuming
they are performing well.
Between the lack of new starts and
the tradeoffs not yet fully understood
between open and unique systems, I
believe progress will be slow in this area
and that we will be challenged to create
a uniform open architecture standard
within the next several years. However,
I do think we will make progress on a
platform basis, and I believe the concepts
inherent in open architecture
– best of breed technologies, collaboration
and affordability – will continue to
serve industry well as we develop and
adapt solutions for the warfighters of
today and tomorrow.
JED: In addition to MOSA, the DOD
is also becoming more interested in
multi-function systems. What work
is ITT Exelis doing in this area?
Multi-functional systems are very
complex from a systems design and
software perspective and yield more
sophisticated solutions. One example
is our JCREW I1B1 system of systems
which uses a MOSA architecture and is
truly multi-functional. This system has
data exchange capability, and it can
perform over-the-air networked monitoring,
control and reprogramming. It
does more than radio frequency counter
IED in terms of its architecture. It
can perform direction finding, and it
can actually get into a network in an
unconventional sense. It is a network
enabler, because all in-view situational
awareness and situation updates can
now be shared through that system.
On the IR side, our IRCM solution was
designed as a multi-function system, as
well. In addition to IR jamming, if you
wanted to do optical communications,
obstacle avoidance or respond to hostile
fire, it was architected to enable
those functions.
But the larger question for industry
is how will the customer value this
additional functionality? The customer
knows the recurring cost profile of
legacy, fielded single-function systems
very well. These single-function legacy
systems have been bought in high quantities
to support OEF/OIF campaigns
over the last five or so years. These high
volume rates have a dramatic impact
on lowering costs through large learning
curve reductions and supply chain
leverage. I do not believe we will see
these high unit volume rates in the near
future.
So, for sake of discussion, let’s just
say it costs $1 for that legacy highvolume
system. And now our customers
want a multi-function system, which
is designed to provide many times the
functionality of predecessor legacy system,
in addition to enabling new, more
effective CONOPS and simplifying reprogramming.
There is a non-recurring
development cost to multi-functionality
that usually has to be borne by the
Program of Record, and there is a clear
compelling warfighter and network situational
awareness/update advantage.
Plus, there is efficiency in going multifunctional…
but at what cost? Perhaps
$1.30 or higher?
I believe those of us in industry and
our customers need to jointly understand
the total holistic value proposition
that multi-function provides, and
not compare it with the single, stovepiped
solutions of several years ago.
Then we can decide if multi-functional is
what we need. There is neither a simple
nor single right answer to the question
of whether/when you need a multifunctional
system. Understanding this, we
will continue collaborating with our
customers to ensure we have the right
solution for the mission at hand. a
The Journal of Electronic Defense | May 2012 25